Intro to Cryptocurrencies and Blockchain Technology (Part 1 of 4)

An Introduction to Bitcoin

The Creation of Bitcoin

The birth of bitcoin occurred on the 31st of October, 2008 (a time period of great economic distress worldwide) when a pseudonymous creator using the name Satoshi Nakamoto published his Bitcoin Whitepaper and shared it on an obscure cryptography mailing list. This seemingly small event set into motion a worldwide financial revolution which spreads and grows exponentially stronger to this day.

What is Bitcoin?

Bitcoin is the first example of a growing category of money known as cryptocurrency

Bitcoin is a form of digital currency that is created and held electronically. No one controls it. Unlike fiat money, bitcoins aren’t printed. Instead, bitcoin is produced when people and businesses use their computers to solve complex mathematical functions. The production of bitcoin is a process known as “mining“. Mining occurs simultaneously with transaction verifications. Violations of the math are rejected by the system, making forgery statistically impossible.

Bitcoin can be used to make electronic purchases. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally. However, bitcoin’s most important characteristic and the thing that makes it different from conventional money is that it is decentralized. No single institution controls the bitcoin network. Decentralization allows for users of bitcoin to operate outside the confines of bank holidays and fees. Bitcoin users can also transact value globally without the need for identity or residency information.

The bitcoin blockchain has had ZERO minutes of “downtime” since its launch in 2009

The entire bitcoin network runs on a global peer-to-peer distributed ledger system called a “blockchain” which can be easily accessed from any location via the internet. The transactions which take place between the users are verified and added to the global blockchain ledger by “miners” who, by contributing their computing power, earn small transaction fees and generate new bitcoins. The distributed nature of the blockchain ledger adds a level of resiliency that is unmatched in the current payment processing space.

Centralized -vs- Decentralized

FEDERAL RESERVE

The Federal Reserve calculates all their payment processing at 100 Orchard Street, East Rutherford, New Jersey. They also have backup systems that can be brought online within 60-90 minutes at the Federal Reserve Banks of Richmond and Dallas. If those three centers were compromised or destroyed then the entire monetary system of the United States would be completely nonfunctional.

BITCOIN NETWORK

The Bitcoin network cannot be so easily compromised in this way as it has a current total of 9899 mining nodes (or “processing centers”) with more being added every day by various individuals and companies around the world. In order for the Bitcoin network to be taken out by a physical attack, all of the thousands of Bitcoin nodes scattered around the world would have to be destroyed.

The bitcoin blockchain equally distributes authority to all the users of the network. The bitcoin network is not owned, issued, or governed by any central authority, but is governed by the blockchain protocol which clearly lays out the never-changing rules of the system. Users ARE the system. No human status or title will ever cause the system to treat one user more favorably than another.

THE AGE OF CRYPTOCURRENCY – New York Times Best Seller (2015)

“At its core, cryptocurrency is not about the ups and downs of the digital currency market; it’s not even about a new unit of exchange to replace the dollar or the euro or the yen. It’s about freeing people from the tyranny of centralized trust. It speaks to the tantalizing prospect that we can take power away from the center – away from banks, governments, lawyers, and the tribal leaders of Afghanistan – and transfer it to the periphery, to We, the People.” – Paul Vigna(Markets Reported at The Wall Street Journal) and Michael Casey(Former global finance columnist at The Wall Street Journal)